AHDB Pig Market Weekly

AHDB Pig Market Weekly - 18 June 2015

UK pig meat trade falls in April

According to the latest data from HMRC, UK pork imports in April 2015 decreased 7% on the level seen a year ago. The main falls were from Germany, the Netherlands, Belgium and France, while volumes from Denmark, the largest supplier of pork to the UK, Spain and Ireland actually increased. Volumes imported from Poland remain small relative to other countries but have been showing large increases for a number of months. These figures show that the preference for UK pork largely remains in place, following suggestions that the difference in prices was leading buyers to switch to European pork after imports in February and March increased. The total value of pork imports fell 16% as average unit values saw sharp falls. Shipments of bacon to the UK were down 1% in April, with larger falls from both Denmark and the Netherlands, while volumes from Germany and Ireland increased. Imports of processed pork fell 21% due to lower shipments form Ireland and Poland, while sausage imports fell 8% following a decline in volumes from Germany and the Netherlands.

UK pork exports continued to fall in April, being down 7%, as the continuing strength of the pound reduced the UK’s competitiveness against EU pork on international markets. Falls were seen in shipments to Germany, the Netherlands, Hong Kong and Belgium, while exports to Denmark, China and Ireland were higher than a year ago. Despite the fall in shipments to Germany, it remained the largest destination for UK exports in April. A decline in average unit prices led the total value of exports to fall 15% year on year to £14.7 million. Offal shipments during the month were up nearly a quarter due to a large increase in volumes shipped to China, along with some recovery in exports to the rest of the EU.

Producer share of retail price remains stable

In May, the share of the retail price received by producers remained level with the previous month at just below 35%, as both farmgate and retail prices were stable, each moving by less than 1%. However this remains 6 percentage points below May 2014, as much sharper falls have been seen since then in farmgate prices than in retail prices. There was actually a very marginal increase in the share of the retail price received by farmers which meant that April remained the lowest level in over six years, with May being the second lowest.

Retail pork price trends were mixed in May, with boneless legs, pork fillet and traditional pork sausages all increasing in price by 1%, while the price of pork shoulder, loin steaks and minced pork all fell by 1%, leaving overall retail prices level with the previous month. Pork mince and loin chops remained the only cuts to increase in price compared to a year earlier, both up 1%. All other cuts fell in price, with boneless legs down 6%, while fillet end legs and diced pork were down 5%.

UK pig prices

UK finished pig prices increased by less than half a penny for the third consecutive week in the week ended 13 June. The EU-spec SPP was up by just under a third of a penny at 131.90p/kg as the supply and demand balance tipped slightly towards a tighter situation. Prices remain just above 32p below the levels seen in 2014 but this is a smaller difference than last week, as prices in 2014 were falling at this time. Estimated slaughterings were 2% down on the week but remained above levels seen in the same week of 2014. Carcase weights were at their lowest level of the year so far, adding to the tightening of the market, but remained over half a kilo up on the previous year. The average probe measurement also fell in the last week as could be expected with the lighter carcases.

The GB APP continued to follow the trends seen in the SPP in the week ended 6 June, with a marginal increase recorded. Prices were up just over a tenth of a penny at 136.32p/kg. This means the difference between prices in 2015 and 2014 fell below 30p, while the difference between APP and SPP fell slightly to below 5p per kilo.

In the week ended 13 June the price of both 7kg and 30kg weaners decreased following increases seen in the previous week. The price of 7kg weaners was down 65p on the week at £32.60, a new low point for this series as the number of piglets being traded was reported to be high. Meanwhile, the price of 30kg weaners fell by 30p to £44.52 a head. This meant both weaner prices were well below the levels seen in 2014, with 7kg and 30kg weaners down by over £9 and £12 respectively.

EU pig supplies plentiful in quarter 1

The number of pigs slaughtered across the EU in the first three months of 2015 was almost 5% higher than a year earlier. At 64.7 million head, almost 3 million more pigs were killed than in the first quarter of 2014. While the earlier Easter may have contributed to this and particularly to the 9% rise in March throughputs, it is clear that supplies were plentiful during the period. With carcase weights slightly heavier than last year, pig meat production was up by 6% during the quarter, at 5.86 million tonnes. The percentage increase in March was into double figures, although there was one more working day than in March 2014. Output during the month topped 2 million tonnes, a record figure for March. This may help to explain why the upward momentum in pig prices was not maintained in March. However, the fact that prices held up, albeit at a relatively low level, in the face of such high supplies may indicate some firming of demand.

All of the major producing member states increased production in early 2015. The most notable growth was in Spain, where throughputs were up 8% and production 12% on the back of strong herd expansion last year. Poland was one of several Eastern member states whose production was up strongly, in the Polish case by 7%, as herds have now stabilised following several years of declines and productivity is improving. Denmark, Germany, the Netherlands, Italy and Belgium also recorded significant growth but French production was little changed.

Early indications are that there may have been some modest tightening of supplies in April, although the earlier Easter was probably a factor. This helped to provide some support to prices during the month.

Global pork prices depressed

Globally, pork prices were exceptionally high in 2014, at least outside the EU. This year, it looks like the opposite will be true. By April, global export prices were a full dollar lower below their level at last summer’s peak. The decline in export prices has also been reflected in domestic prices in many parts of the world.

Feed market update

Grain markets faced a bit of a reality check in the past week, helping futures to ease. A selection of weather events, not all of them new, provided mixed news. UK Nov-15 feed wheat futures closed at £122.25/t on Tuesday, down £7.25 on the week. The buoyant sentiment in markets up until last Wednesday was reversed with the release of the latest USDA World Supply and Demand estimates. The global wheat production forecast for 2015/16 was increased by 2.6Mt to 721.55Mt, with EU production raised by 0.4Mt. Increases to South American maize crop estimates for 2014/15 led to higher global end-stock estimates. The impact of weather fears on US winter wheat became a little clearer, with the first test results from harvest showing poor quality for the typically milling-grade Hard Red Winter crop. From a feed grain perspective, this would mean greater global supplies of feed grains should these results be repeated across the US harvest.As of Friday, soyameal prices in the UK followed the downward trend in soyabean futures. Brazilian soyameal (48%, ex-store Liverpool, spot delivery) was £293/t, down £1 week-on-week. However, soyabean futures have risen once more since the beginning of this week. Nov-15 Paris rapeseed futures fell approximately £6 week-on-week to close around £269/t on Tuesday. With the deadlines for qualifying for crop insurance rapidly approaching (and in some states now passed), there is a risk that not all intended soyabean area will be planted in the US, with only 87% of the intended area sown by 14 June.

International meat prices fall as supplies grow

Meat prices have fallen in the first four months of 2015, according to the latest Food Outlook published by the FAO. This comes as global meat production is anticipated to continue expanding, at around 1.3% in 2015, 4 million tonnes up on 2014. Meat production is being driven by expansion in the pig and poultry sectors. As lower input costs, for example low feed costs from good global cereal and grain harvests, have supported increasing supply, finished prices have remained proportionately low.

With expansion of meat production predominantly in regions where demand is also growing, particularly for poultry, a slight slow-down in overall meat trading is to be expected. Trade growth is expected to be only 1.7% this year; this is less than last year but stronger than production growth. Pig meat will have a significant role in this, as key exporting countries like the US recover from PEDv and expand. China is set to produce over half of the world’s pig meat in 2015 but will also increase its import capacity as domestic demand remains strong.

Sheep meat is the only protein for which trade is expected to reduce this year, as key exporters New Zealand and Australia report only modest production growth. Bovine meat production is expected to remain static on the year, leading to it being the only protein to increase in price in 2015, as demand grows ahead of supply.

Italian imports strong in early 2015

The EU’s largest net importer of pork, Italy, bought 4% more in the first three months of this year than a year before. At 269,000 tonnes, this represented the highest level of shipments for the first quarter in records back to 2000, helping to absorb some of the increased production across the EU. The largest supplier, Germany, which provides around a third of Italian imports, slightly increased its share, as did Spain and Denmark. This was offset by modest falls in shipments from the Netherlands and France. Among smaller suppliers, Poland and Austria increased volumes. With pork in more plentiful supply across Europe this year, prices were 9% down on the first three months of 2014. As a result, the value of imports fell by 6% to €478 million.

The increased imports helped fill some of the gap left by reduced domestic production. Despite this reduction, exports of speciality hams (the main output of the Italian industry) performed strongly in the first quarter, with 5% year-on-year growth. Shipments totalled 15,900 tonnes at a value of €160 million, up 3% on last year as prices held up well. France and Germany are the leading markets and both took more Italian ham, as did the UK. Outside the EU, exports to the US increased by around 20%, making it the third largest market for these products.